ACCOUNTING 101 -FINAL EXAM-VERSION A Use the following to answer questions 21-25

Question

ACCOUNTING 101 -FINAL EXAM-VERSION A Use the following to answer questions 21-25: Arista Company adjusts its accounts at the end of each month. The following information has assembled in order to prepare the required adjusting entries at December 31: been (1) A one-year bank loan of $360,000 at an annual in December 1 (2) The company's pays all employees up-to-date each Friday. Since December 31 fell on Tuesday, there was a liability to employees at December 31 for two days pay amounting to $5,900. (3) On December I rent on the office building had been paid for four months. Monthly rent is $3,000 (4) Depreciation of office equipment is based on a lifetime of six years. The balance in the Office Equipment account is $7,200; no change has occurred in the account during the year. (5) Fees of $7,600 were earned during the month for clients who had paid in advance. terest rate of 12% had been obtained on 21. What amount of interest expense has accrued on the bank loan? A) $2,400 B) $3,000 C) S3,600. D) S4,200. 22. The entry to record rent expense will include: A) A debit to Prepaid Rent for $3,000. B) A credit to Prepaid Rent for $3,000 C) A credit to Prepaid Rent for $9,000 D) A debit to Prepaid Rent for $9,000. By what amount will the book value of the office equipment decline after the appropriate December adjustment is recorded? A) $1,200. B) $100. C) so. D) None of these choices. 23. 24·The accrued interest should be: A) Debited to Notes Payable B) Credited to Interest Payable Credited to Cash. Credited to Interest Expense. D)

Explanation / Answer

21. Correct Answer is Option C i.e. $3,600.

Explanation: ($360,000 x 12%) / 12 months = $3,600

22. Correct Answer is Option B i.e. A credit to Prepaid Rent for $3,000

23. Correct Answer is Option A i.e. $1,200 i.e. ($7,200 / 6 years)

24. Correct Answer is Option B i.e. Credited to Interest Payable.

25. Correct Answer is Option A i.e. Decrease by $7,600

26. Correct Answer is Option B i.e. As it accrues.

Note: Post only 4 questions at a time.

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